2021 (6) TMI 352 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - The default has occurred with respect to the payment of the operational debt due to the Applicant. The corporate debtor has failed to show any existence of dispute as the applicant has clearly established that the claim with respect to quality is an afterthought, in view of email sent by corporate debtor dated 04.05.2016 describing the quality of goods as 'superior quality' 'technical advantage of high tensile'. The corporate debtor has failed to place on record any concrete evidence to prove that there was a genuine dispute which was raised prior to issuance of notice under section 8 and the said was duly communicated time and again to the applicant. The communication of the corporate debtor with its customers cannot be considered as disputes against the transactions with the applicant. There is no such dispute is pre-existing and we are convinced that the present dispute is patently feeble legal argument. The application being complete needs to be admitted - registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application - The last invoice was raised on 09.08.2016, and the present application was filed on 24.04.2018, hence the debt is not time barred and the application is filed within the period of limitation. The present application is complete and the Applicant is entitled to claim its dues, establishing the default in payment of the operational debt beyond doubt. The present application is admitted, in terms of section 9(5) of IBC, 2016 - Moratorium declared.

Summary

Issues:
- Application under section 9 of Insolvency and Bankruptcy Code, 2016
- Quality dispute between Applicant and Corporate Debtor
- Existence of genuine dispute prior to notice under section 8
- Jurisdiction of the Tribunal
- Limitation period for filing the application
- Appointment of Interim Resolution Professional (IRP)
- Deposit by Operational Creditors with IRP
- Moratorium period under Section 14 of the Code

Analysis:

1. Application under section 9 of Insolvency and Bankruptcy Code, 2016:
The Applicant, a limited company, filed an application seeking to initiate the Corporate Insolvency process against the Corporate Debtor under section 9 of the Insolvency and Bankruptcy Code, 2016, due to outstanding dues amounting to ?8,42,863. The Applicant provided details of the transactions, invoices, and the failure of the Corporate Debtor to make payments despite reminders and demand notices.

2. Quality dispute between Applicant and Corporate Debtor:
The Corporate Debtor raised a dispute regarding the quality of goods supplied by the Applicant, alleging losses and rejection of materials by their clients due to poor quality. The Applicant countered these claims, asserting that the goods supplied were of superior quality and any issues must have arisen at the Corporate Debtor's warehouse. The Tribunal found the quality dispute to be an afterthought by the Corporate Debtor, lacking concrete evidence.

3. Existence of genuine dispute prior to notice under section 8:
The Tribunal examined the communication between the parties and concluded that the Corporate Debtor failed to demonstrate a genuine dispute existing before the issuance of the notice under section 8. Citing a Supreme Court judgment, the Tribunal emphasized the need to separate genuine contentions from feeble legal arguments, ultimately admitting the application under section 9.

4. Jurisdiction of the Tribunal:
Given the location of the Corporate Debtor's registered office in Delhi, the Tribunal asserted its jurisdiction to entertain and adjudicate the application filed by the Applicant under the Insolvency and Bankruptcy Code.

5. Limitation period for filing the application:
The Tribunal confirmed that the application was filed within the prescribed limitation period, as the last invoice was raised on 09.08.2016, and the application was filed on 24.04.2018, ensuring that the debt was not time-barred.

6. Appointment of Interim Resolution Professional (IRP):
The Applicant proposed the name of an IRP in the application, subsequently seeking a change in the proposed IRP to Mr. Mukesh Gupta, whose appointment was approved by the Tribunal. The IRP was directed to comply with regulatory requirements and disclose necessary information within a specified timeframe.

7. Deposit by Operational Creditors with IRP:
Operational Creditors were instructed to deposit a sum of ?2 lakhs with the appointed IRP to cover the expenses related to the insolvency resolution process. The amount deposited would be subject to adjustment by the Committee of Creditors and refunded to the Operational Creditor as necessary.

8. Moratorium period under Section 14 of the Code:
Upon the admission of the application under section 9(5) of the Insolvency and Bankruptcy Code, the Tribunal imposed a moratorium on the Corporate Debtor as per the provisions of Section 14(1), prohibiting certain actions during the specified period, with additional provisions coming into force as per Sections 14(2) to 14(4).

9. Communication and Compliance:
The Tribunal directed the communication of the order to the parties involved, including the Applicant, Corporate Debtor, and the appointed IRP. Copies of the order were also forwarded to relevant regulatory bodies for record-keeping and compliance purposes, ensuring transparency and procedural adherence.

This detailed analysis covers the key issues addressed in the judgment, providing a comprehensive understanding of the legal proceedings and decisions made by the Tribunal.